COURT FILE NO.: FS-19-13437

DATE: 20231228

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

John Neofotistos Applicant

– and –

Soula Neofotistos Respondent

Forget, R., for the Applicant

Self-represented

HEARD: June 28 & 29, 2023

REASONS FOR DECISION

P.T. Sugunasiri, J.:

Overview:

[1] This case emphasizes the importance of proper financial disclosure and asset valuation when parties ask a court to quantify equalization and spousal support in matrimonial litigation. John and Soula were married on July 18, 1988, and separated on December 15, 2017. They have two adult children, born July 4, 1991, and July 19, 1995. In October of 2019 John applied for simple divorce and was met with a request from Soula for equalization, spousal support and some other financial remedies related to the matrimonial home. The matrimonial home was sold on January 31, 2017. Each party received $528,000.

[2] John is a self-employed insurance broker and a 1/3 shareholder and director of his closely held company, Neostein Risk Management Inc. (“NRMI”). Since July 4, 1991, when their daughter was born, Soula has been a homemaker. Prior to that she operated a dry-cleaning business in the Beaches area of Toronto. She has also dabbled as a travel agent. Currently Soula works part-time for a hotel as a server but is now also a registered real estate agent hoping to earn income in that profession. The focus of this trial is retroactive and ongoing spousal support, and equalization. The problem with this trial is lack of evidence sufficient to support Soula’s claim to equalization and John’s claim that he cannot afford spousal support.

Brief Conclusion:

[3] Pursuant to the Divorce Act, R.S.C., 1985, c. 3 (“DA”), John shall pay Soula spousal support of $1480/month from December 15, 2017, to September 30, 2021.

[4] Pursuant to the Divorce Act, John shall pay Soula spousal support of $1212/month from October 1, 2021, to June 28, 2032, payable on the first of every month.

[5] John may proceed with his application for divorce.

[6] John shall receive credits for support payments already made since December 15, 2017, including payments made directly to Soula in September, October and November of 2021.

Analysis:

Soula’s equalization claim is presumed to be abandoned or valued at zero

[7] By operation of s. 5 of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), the parties to the marriage share equally in any increase in the value of family property between marriage and the date of separation. Section 5(1) provides as follows:

When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.

[8] The parties agree that John’s major asset is his interest in NRMI. They were ordered to share in the cost of valuing it. They received a preliminary view from Mr. Orenstein which suggested that NRMI had little or no value in 2017. On April 22, 2022, Justice Faieta heard about Mr. Orenstein’s preliminary assessment but ordered each of the parties to pay $4000 to have Mr. Orenstein provide a formal opinion. Paragraph 4 of His Honour’s order states that “in the event that either party does not accept Mr. Orenstein’s opinion regarding the value of the business as of valuation date, then such party shall at their sole cost retain their own chartered business valuator…” John was willing to rely on Mr. Orenstein’s preliminary assessment. Mr. Orenstein was anticipated in the Trial Scheduling Endorsement Form to be John’s witness. The TSEF also contemplated Soula bringing in her own valuator.

[9] I accept Soula’s evidence that after Mr. Orenstein’s preliminary view, John refused to value the company and wanted to rely on the preliminary assessment. However, at that point Soula could have retained her own valuator to prove her claim. She chose not to. Both John and Soula have acted contrary to Justice Faieta’s order and contrary to the representations they must have made to the trial management conference judge who approved the trial.

[10] Further, neither has met their obligation to compare their net family properties based on detailed, full and frank disclosure. Soula has provided a detailed sworn financial statement but no net family property statement. John has not provided either. It appears he thinks that the fact of his consumer proposal, out of court statements by his trustee, and the trustee’s alleged acceptance of his budget is sufficient evidence for family law purposes. He is incorrect. It was incumbent on John to swear a financial statement that is complete and accurate (Family Law Rules, O. Reg. 114/99 (“FLR”), r. 13(12)), prepare a net family property statement (FLR, r. 13(14)) and prepare a comparison of statements if the parties cannot agree on a joint one (FLR, r. 13(14.3)). His sworn financial statement updated on June 21, 2023, is sparse. He only lists two TFSA accounts and a LIRA account declared in his consumer proposal notwithstanding the fact that in June of 2020 he had two investment accounts with CIBC that have disappeared with no explanation at trial of what happened to those funds. Further he does not provide values of the accounts he does list, on the date of marriage and on the date of separation. John provided a net family property statement dated June 21, 2023, declaring that he had no assets on the date of marriage nor the date of separation. This is unacceptable, especially because John is represented by counsel.

[11] Having said that, the parties had several judges addressing disclosure and the need for a business valuation to determine the value of NRMI for the purpose of equalization. Given the amount of judicial attention on this issue, I find that Soula was sufficiently informed to avail herself of the possible remedies for John’s refusal to pay for a formal report from Mr. Orenstein. She could have pursued her own valuation of NRMI and recovered the cost at trial. She could have sought leave to bring a motion to compel John to retain Mr. Orenstein and pay his share of $4000. She could have gone to To Be Spoken to Court to adjourn the trial or seek some other remedy when she realized that she did not have a value to offer the court. Soula testified that she did not think it was worth it to pursue a valuation if it was just going to be “one piece of paper”. She believes that John did not provide Mr. Orenstein with the proper documentation to value NRMI. This statement reveals that Soula knowingly chose to proceed to court without a valuation.

[12] While the court attempts to level the playing field for an unrepresented litigant as much as possible, they are expected to adhere to the same rules as the represented litigants. In this case, Soula’s choice not to value NRMI or take any other steps to remedy the situation leads me to conclude that she intended to abandon her claim to equalization. Even at trial, Soula requested that she be awarded 50% of NRMI’s share, or a later payout from the company if it is transferred to her son. This is different than seeking an equalization payment. Soula loosely argues that her equity in the home helped support and finance NRMI. She wants a piece of the company rather than a payment of half of any increase in its value during the life of the marriage. Soula tendered no evidence on this point other than oral testimony that she took on debt to finance NRMI. To be clear, corroborating documentary evidence may exist but she did not tender it as an exhibit. She also did not claim that John was unjustly enriched by any contributions or debt load that she carried to finance his company, another argument that might have supported being awarded an interest in NRMI.

[13] On this basis, I find that Soula abandoned her claim for equalization under the FLA. If she did not abandon it, I value it at zero based on both parties’ evidence that John’s major asset is a company which nobody chose to value. Practically speaking, NRMI does not likely have the value Soula hopes for. It is a closely held corporation that is subject to a unanimous shareholders’ agreement between John and two other business partners. This means that its shares are of limited value and subject to restrictions on transfers to third parties. It earns money through referrals to senior brokers who then offer insurance products to clients. NRMI’s specialty pre-pandemic was to broker insurance for tradeshow booths in conjunction with the website exhibitorinsurance.com. John testified that the company did not have a book of business per se. Its value would likely be in any goodwill that John and his partners built up in the trade show industry. Further, NRMI is largely a vehicle for John to draw income from. NRMI’s largest expense is what is referred to in its books as “wages and benefits”. In 2019 for example, NRMI grossed $340,038 but reported $304,656 in expenses, of which $214,110 was attributed to wages and benefits. John drew $95,000 from the company that same year. In other years he drew different amounts, demonstrating that the partners decide how much money to draw from NRMI’s income. This will become relevant later when determining spousal support. The point here is that there is likely little market value to NRMI for the purpose of equalizing it.

[14] If I am wrong in inferring that Soula’s conduct amounts to abandoning her claim for equalization, I would still not be able to find in favour of Soula. I would have to adjourn the trial to obtain more information. The trial judge is to determine equalization before spousal support because the quantum of equalization, if any, will have an impact on the support analysis: Greenglass v. Greenglass, 2010 ONCA 675, 276 O.A.C. 62, at para. 44. In Greenglass, the Court of Appeal for Ontario held that the trial judge erred in fixing spousal support before determining equalization. In that case, counsel had argued that it was a long-term marriage where the support recipient was likely entitled to indefinite support; therefore, equalization made little difference. In this case, Soula and John were in a 29-year marriage and Soula is at least eligible for indefinite support if she establishes entitlement. Greenglass directs that despite such eligibility, I would have to determine equalization before spousal support.

Soula is entitled to retroactive and ongoing spousal support

[15] Soula seeks spousal support on what appears to be a compensatory and non-compensatory basis. Since 2021 John has been paying interim spousal support: $1100/month from January 1, 2021, to May 30, 2021 (Kraft, J. order); $1500/month from June 1, 2021 to March 31, 2022 (Goodman, J. order); $900/month from April 1, 2022 to present (Diamond, J. order). He resists further spousal support on two grounds: 1) He is paying a consumer proposal and does not have the funds to pay spousal support; and 2) Soula has not made appropriate efforts to become self-sufficient. Soula seeks spousal support until she is 65 with an income imputed to John of $95,000.

[16] In determining support, s. 15.2(4) of the DA requires the court to consider “the condition, means, needs and other circumstances of each spouse, including”:

(a) The length of time the spouses cohabited;

(b) The functions performed by each spouse during cohabitation; and

(c) Any order, agreement or arrangement relating to support of either spouse.

[17] The objectives of a spousal support order are set out in s. 15.2(6) of the DA. A spousal support order should achieve the following objectives:

(a) Recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;

(b) Apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(c) Relieve any economic hardship of the spouses arising from the breakdown of the marriage; and

(d) In so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

[18] The Supreme Court has instructed that “no single objective is paramount; all must be borne in mind”: Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420, at p. 440. Justice McLachlin continued, “There is no hard and fast rule. The judge must look at all the factors in the light of the stipulated objectives of support, and exercise his or her discretion in a manner that equitably alleviates the adverse consequences of the marriage breakdown.” In Moge v. Moge, [1992] 3 S.C.R. 813, at p. 864, 1992 CanLII 25 at para. 74, the Supreme Court stated that “marriage per se does not automatically entitle a spouse to support.” Rather, it is the relationship that was established and the expectations that may reasonably flow from it that give rise to the obligation for support: Bracklow, at p. 445.

[19] In Thompson v. Thompson, 2013 ONSC 5500, at para. 58, Justice Chappel summarizes the principles that inform a court’s determination of a spouse’s eligibility for compensatory support:

A compensatory claim for spousal support may be established even where the recipient spouse is employed and reasonably self-supporting at the time of the parties' separation. This situation can arise where, despite that spouse's ability to meet their own needs, their financial advancement has been impaired as a result of subordinating their career to that of the other spouse, or from adopting a less lucrative career path in order to accommodate the needs of the family.

[20] Soula testified, and I accept that after their first child was born, she sold her dry-cleaning business to become a homemaker. This allowed John to focus on growing his business, travelling, and golfing at an expensive club, presumably necessary for growing and maintaining business relationships. This allowed them to save on daycare costs. This allowed John to have piece of mind that his children were well cared for, and that his home was in order, so that he could concentrate on work. I accept Soula’s evidence that he did use the opportunity to concentrate on work and that he travelled a lot. John’s evidence did not contradict this account. He agreed that he worked day and night and went to the States twice a week for five years. What John must realize is that the work of a stay-at-home parent, like his work out of the home, has value.

[21] The parties’ second child turned 18 in 2013. John argues that she could have gone back to paid work then. However, by that time Soula had been out of the workforce for 22 years. John testified that he begged Soula to get a minimum wage job to help ends meet. Even if she had done that, it would not disqualify her from a compensatory spousal support claim. Soula’s role in the marriage impaired her financial advancement and the pursuit of her own business endeavours. After 29 years of marriage and successfully raising two children, a minimum wage job would not have compensated her for her role in the marriage or giving up a business that according to Soula (and not contradicted by John), was thriving. Soula is entitled to compensatory support.

[22] Though I can fix support on her compensatory entitlement alone, I also find that Soula is entitled to non-compensatory support. In Bracklow, at p. 442, Justice McLachlin instructed that the DA contemplates an obligation of support beyond any contractual or compensatory basis upon consideration of the “spouse’s actual ability to fend for himself or herself and the effort that has been made to do so, including efforts after the marriage breakdown.” This is part of the assessment of the “condition, means, needs and other circumstances of each spouse”, as required by s. 15.2(4) of the DA. In this case, Soula has provided pay stubs and notices of assessment since the date of separation on December 15, 2017. She works as a part-time server at a hotel earning minimum wage. In 2021 she earned $22,171. In 2022 she earned $12,260. Using the income amounts found in John’s Request to Admit at paragraph 8, from 2016 to 2019, Soula earned an average wage of $12,595 annually. Even if, as John says, she worked as a full-time server, her income would be under $40,000. She currently resides with her parents, having once lived in a 3000 square foot house with John. She has $158,000 saved from the sale of the home and has recently obtained her real estate licence.

[23] John’s means and ability to pay is the wildcard in this case. From 2016 to 2020 his draws from NRMI averaged $61,436.60 (Request to Admit, paragraph 9). He testified that because his business focused on exhibitor insurance for tradeshows, his income was significantly impacted by Covid. John explained that the strong showing in 2020 was due to CERB assistance. In 2020 John also held two Investor Edge accounts at CIBC with one registered investment account showing a balance of $30,119.30 as of June 30, 2020. On September 14, 2021, John filed a consumer proposal with debts of $250,500. The CRA is his largest creditor followed by multiple credit card issuers. Under that proposal, the creditors agreed to stay collection of the outstanding debts in exchange for monthly payments of $750 for 12 months and payments of $1000/month for an additional 48 months. At this rate, John will complete his proposal by September 13, 2026. If he misses a payment, the proposal would be deemed to be annulled and the creditors would be free to pursue collection of their debts: Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, ss. 66.31(1), 66.32.

[24] The problem is, John has provided little evidence of his means, needs and circumstances. The little he has provided is not reliable. I do not know where he lives or what his living circumstances are. He attests in his affidavit in chief that he found other insurance work that earns $52,000/year. I have no details about the nature of this work, how it is earned, whether he earns the income through NRMI or from another employer. I have no current income tax returns from him nor financial statements from NRMI showing what draws he might be taking or have access to. John’s updated sworn financial statement shows him earning $68,788/year with yearly expenses of $73,536. John’s Statement of Affairs in the consumer proposal seems to list only some of his bank accounts and leaves out the Investor Edge accounts that he appeared to have had in June of 2020. If those accounts no longer exist he has not explained where the money went. Who knows how detailed his trustee’s review of his finances was. The trustee did not testify. As it stands the Statement of Affairs and the budget prepared in the proposal appear perfunctory and largely pro forma. There are no back up documents supporting the alleged expenses in any budget that John has produced. John also has some control of how much he draws from NRMI as a shareholder and director. If he does not have control he has not explained why and how his income from NRMI has fluctuated over the years. I have no information on the company since 2019. John provided handwritten “paystubs” for 2020 with no explanation of how the amounts were decided.

[25] This is the barren landscape in which I must quantify spousal support. I infer from John’s opacity in this trial that he currently earns more than he says or has access to funds that have not been disclosed. He still purports to live beyond his means with no explanation of how he meets the deficit. John’s financial picture simply has too many gaps to be helpful or reliable. I accept his argument however that it has been 10 years since their youngest child became an adult and Soula has had time to start reintegrating into the workforce in some capacity. Aside from Soula running a dry-cleaning business, neither party has tendered information about Soula’s abilities, training and education that would assist her in being employed beyond a minimum wage job or another business venture like real estate. I also understand that John intends to retire at age 70 and pass the business down to his son. To Soula’s point and on John’s admission, the hope is to rebuild NRMI and increase his income again so that there is something to pass down. John admits that the tradeshows have started to return in 2023.

[26] I consider two separate periods for support purposes: pre-consumer proposal and post-consumer proposal. John has provided a calculation of spousal support based on his reported income of $68,788 and imputing income to Soula of $30,000. These are appropriate figures to use in calculating support for both periods. The difference is in range. Given the circumstances of John and Soula, I order John to pay the higher end of the SSAG range which I calculate as $1480/month for the period December 15, 2017, to September 30, 2021, with credit for amounts already paid pursuant to Justice Kraft and Justice Goodman’s interim orders. From October 1, 2021, until June 28, 2032, when Soula turns 64 and John turns 70, I order John to pay the low end of spousal support at a rate of $1212/month, with credit to John from payments arising from Justice Goodman and Justice Diamond’s interim orders.

[27] Soula is on her way to self-sufficiency. She paid $8000 to obtain her real estate licence last year and is working with Diamond Realty Inc. at 1570 Kipling Avenue, Suite 200. The amounts ordered will assist her in this process and are within John’s means. The order meets the spousal support objective of recognizing Soula’s role during the 29-year marriage and her economic disadvantage arising from its breakdown, while encouraging self-sufficiency.

Miscellaneous matter:

[28] John argues that he paid for rent arrears for Soula’s apartment even though he did not live there. I make no adjustment to John’s spousal support obligation due to these payments. Those arrears are captured by the debt relief granted to him by his consumer proposal.

[29] Soula seeks repayment of a bank overdraft that she covered. I have insufficient evidence on this issue to make an order.

[30] Soula initially sought repayment of $100,000 alleged to be owing to her parents who helped John and Soula purchase their matrimonial home. I did not receive evidence on this issue.

[31] John alleges that he made payments to Soula to cover spousal support arrears. He e-transferred $1500 to her on September 1, 2021; $1500 on October 5, 2021 and $1400 on November 3, 2021. These are supported by his Scotiabank statements and should be credited to him as support paid.

Disposition:

[32] A judgment shall issue on the following terms:

a. Pursuant to the Divorce Act, John shall pay Soula spousal support of $1480/month from December 15, 2017 to September 30, 2021 with credit for any support payments already made pursuant to interim support orders.

b. Pursuant to the Divorce Act, John shall pay Soula spousal support of $1212/month from October 1, 2021, to June 28, 2032, payable on the first of every month with credit for any support payments already made pursuant to interim support orders and for $1500 paid in September and October, 2021, and $1500 paid in November of 2021.

c. A Support Deduction Order shall issue.

d. John is at liberty to pursue his Divorce Application. His Application is otherwise dismissed.

e. Other than her claim for spousal support, Soula’s claims in her Answer are dismissed.

f. The judgment bears pre-judgment and post-judgment interest at the rate set out in the Courts of Justice Act, R.S.O. 1990, c. C.43.

[33] I direct John’s counsel to draft a form of Judgment to circulate to Soula for her approval as to form and content. He can then send it to Jessica.Crispo@ontario.ca for my signature, of course copying Soula on that email.

Costs:

[34] I encourage the parties to agree on costs. If they cannot, Soula can provide a Bill of Costs for any counsel who have assisted her in this case, any offers to settle, plus three-pages, double spaced of costs submissions by January 19, 2024. John can respond in kind by January 31, 2024. All submissions shall be filed with the family office through the portal and sent to my assistant, Jessica.Crispo@ontario.ca.

Justice P. Tamara Sugunasiri

Released: December 28, 2023

Neofotistos v. Neofotistos, 2023 ONSC 7234

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

John Neofotistos Applicant

– and –

Soula Neofotistos Respondent

REASONS FOR JUDGMENT

P.T. Sugunasiri, J.

Released: December 28, 2023